Payment of commission for an worker within the garb of non-compete fee needs to be taxed as salary in the hands

The assessee would be a general telemarketer (GSA) of UC Corporation. Throughout the entire year, he received an income of Rs. 1,32,000. With a non-compete agreement (NCA), he was further titled to particular commission additionally to his regular salary. Throughout assessment, the AO held that commission debited by UC was Rs. 8.47 crores, as the assessee had proven basically Rs. 74 lakhs as business earnings following cash system of accounting. The AO contended that such NCA ended up being to be taxed as salary rather than business earnings. On appeal, the CIT(A) maintaining an order of AO came to the conclusion that portrayal from the amount as non-compete costs was an effort to lessen the tax liability. However, the Tribunal corrected the findings from the CIT(A) and held that the arrangement in which the source follows the mercantile system of accounting and also the recipient follows the money product is well known one and adopted, and was, thus, not really a colourable device to evade taxes.

On appeal, our prime Court held towards revenue as under:

1) The assessee contended he was the controller from the firm. However, in the event that was correct he then could not claim receipt of Rs.1,32,000 as salary compensated through the firm to him in the capacity being an worker. Consequently, all of the amounts received by him ought to be earnings from business. However, which was not what he contended

2) The assessee, of course, was without a company of their own and had been treated being an worker with regards to the breaks

3) The assessee ongoing to generate the non-compete commission in the capacity being an worker, to avoid transporting on any company much like those of UC

4) Also, he ongoing his employment using the firm, and was handed commission for doing what he was normally likely to do, i.e., work with the stated firm in the specialization and

5) Additionally to salary, he seemed to be given commission because of not rivaling his employer, throughout his employment, regarding exactly the same profession, by which he labored being an worker from the firm.

Therefore, it had been held the commission was clearly part of salary underneath the inclusive definition under 17 – [2012] 28 28 (Delhi)

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